by:BARRY FITZGERALDFrom:The AustralianFebruary 19, 201312:00AM...

by:BARRY FITZGERALD
From:The Australian
February 19, 201312:00AM

Mincor Resources (MCR)

There are a couple of certainties that can be said about Kambalda nickel producer Mincor Resources.

The first is that it has an ability to pay dividends no matter how distressed the nickel price seems to get. The other certainty is that chief executive David Moore wears his waistcoat no matter how hot it gets outside.

And so it was yesterday in Melbourne where, despite the mercury nudging a tie-loosening 35C, Moore-in-waistcoat could be found picking up kudos from investors for Mincor's 2c-a-share interim dividend, announced last week with the release of the group's December half profit report. There was a bottom line loss of $2.21 million which was after non-cash depreciation and amortisation charges. More relevant was Mincor's ability to generate operational cashflow of $16.53m, comfortably in excess of the $12.77m spent on capital development and nickel and copper/gold exploration. The ability to generate its best cash cost performance since the June 2009 half year, despite a 10 per cent fall in realised nickel prices in the period, was no mean feat.

It is exactly the sort of stuff the companies at the other end of the spectrum -- BHP Billiton and Rio Tinto -- are now trying to achieve as their earnings come under the pressure of lower prices. Being a smaller and nimble outfit obviously has its benefits. And should nickel prices eventually turn for the better, the company is poised to benefit in a major way, having got its costs to levels comfortably below prevailing prices.

Moore himself reckons the nickel price may well have reached its nadir, having dropped 45 per cent between February 2011 and August last year. "This has put the entire industry under pressure and decimated profits globally," he reckons. Mincor has not been immune to the pressures. But at least its Kambalda operations are now poised to benefit from any upturn in the price of the key stainless steel ingredient.

Being poised for the upturn is all well and good. But for as long as nickel bounces around current levels of $US8.18 a pound, Mincor will bounce around its current price of 93c a share, valuing the company at a none-too-challenging $175m, given that it has no debt and has a cash kitty of some $70m.

But there is potential for some game-changing action, courtesy of the exploration drill-bit. Thanks to the cash thrown off by its Kambalda nickel operation, Mincor has an ongoing ability to fund an annual exploration effort of $16m. About half of that is spent in and around Kambalda, where Mincor has managed to keep three years of mine life ahead of itself despite 12 years of continuous mining. More of the same can be expected.

The real excitement could come from the more regional Kambalda exploration effort. Regional exploration at the Cassini and the Mons exploration targets will be worth watching, remembering that the market can get very, very excited about nickel sulphide exploration results.

For proof of that, just take a look at the $450m-plus market value of nickel explorer Sirius Resources on the strength of its Nova discovery. And while that is being done, remember that Mincor is an established nickel producer capable of self-funding its exploration effort while also having the cash to rapidly bring any new discovery in to production.

Anyway, it is Mincor's exploration effort in Papua New Guinea that is this columnist's personal favourite, most notably the Bolobip copper/gold prospect, 60km east of the Ok Tedi mine. It's old CRA exploration ground which, despite having all the right signatures to be a sizeable gold/copper porphyry, has yet to be tested. Mincor is to put that right later this year. It will only take three or four holes to see if Bolobip has got what it takes to become a game-changer.

http://www.theaustralian.com.au/business/opinion/bright-days-dull-golds-shine/story-fnciil7d-1226580640883